Backsliding a bit against a backdrop of decent economic indicators, hawkish overtones to Fed rhetoric and the uncomfortable need to wait weeks or months for the key market swing factors to reveal themselves. Call it a “benign now, pay later” sentiment hovering over the Street and keeping risk appetites in check after a nice rebound rally. The S & P 500 has now retraced a bit less than a quarter of the 9.1% rip from the May 20 low through Friday’s close. That’s well within the normal range for a consolidation but uncomfortable enough given the fickleness of several doomed rally attempts this year. Bulls probably have an interest in hoping the 4,000 area or thereabouts holds while really hoping 3,900 isn’t breached — if the index gets there. It’s a bit soon for a proper retest of the ultimate lows, but of course there are only rules of thumb in this game, not laws of nature. Source: FactSet Former NY Fed President Bill Dudley jacking his estimate of an ultimate “neutral” Fed funds rate well above current market and Fed expectations, while Atlanta Fed chief Bostic clarifies that any September “pause” would be about economic slowdown rather than regard for market conditions, sent the Fed-perception pendulum back toward the more aggressive end of the anticipated range. There’s not much new here but also wasn’t much new in last week’s more dovish inferences. It points to the fact that the next two months have 100 basis points of tightening baked, and the entire argument is over the eventual end-point — which is unknowable for months and unforecastable with any certainty. ISM and job-opening data were firm, which again slides the bets toward more vs. fewer rate hikes and gooses bond-market jumpiness. The 2-year Treasury yield turning higher toward the recent highs. Source: FactSet Did the recent near-20% slide to the lows in S & P 500 moderate valuations enough to account for the Fed’s path? There’s no precise way to answer, but Fidelity macro strategist Jurrien Timmer models S & P 500 forward P/E in a way that says, “Maybe so.” Source: Fidelity Of course, much depends on the sturdiness of the forecast earnings inside that P/E. Consensus estimates have held up, thanks largely to energy and other inflation beneficiaries, though net estimate revisions are threatening to roll over into negative territory. S & P Global suspending guidance on a dearth of debt offerings hurting its rating business today, a once-reliable “compounder” now suspect. The stock only off 3-4% but in total has shed 30% from its highs. MMM warning on revenue hit from China lockdowns, supply chain, the shares off almost 2%. JPM’s Jamie Dimon in typical fashion highlighting a potential economic “hurricane,” while also saying consumer and corporate conditions are good right now. Very on-brand for the bank whose identity is as the “fortress” institution that let’s less-disciplined competitors have the risky, temporary late-cycle profits. Clearly the risks have risen for a hard economic outcome, so I’m not sure Dimon’s comments at a conference inform the debate all that much. Credit markets continue to firm, spreads recovering toward tighter levels and a good helping of new issuance getting done. Market breadth is weak, 75% downside volume, a bunch of profit-taking and re-shorting after the three-day burst of buying that registered as a bullish “breadth thrust” signal by some lights. All a very noisy, fluid tape, some good forward implications from last week’s burst higher but most have to do with more distant multi-month returns rather than the immediate stretch of road ahead.